Harvard Business Review Explains How Big Content Is Strangling Innovation

from the good-for-them dept

John Anthony was the first of a whole bunch of you to send over this excellent article by James Allworth at Harvard Business Review, talking about how the big record labels and the big movie studios are strangling innovation with their braindead, backwards-looking, protectionist approach to anything that changes the market they've been in for years. There isn't necessarily much new in the article for folks who regularly read what we talk about here, but it does a nice job pulling the pieces together, and it's great to see HBR publish such a piece:

Many in the high technology industry have known this for a long time. Despite making their living relying on it, the Big Content players do not understand technology, and never have. Rather than see it as an opportunity to reach new audiences, technology has always been a threat to them. Example after example abounds of this attitude; whether it was the VCR which was "to the American film producer and the American public as the Boston strangler is to the woman home alone" as famed movie industry lobbyist Jack Valenti put it at a congressional hearing, or MP3 technology, which they tried to sue out of existence. In fact, it's possible to go back as far as the gramophone and see the content industries rail against new technology. The reason why? Every shift in technology is difficult for them. Just as they work out how to make money using one technology, it changes.

The sensible thing for them to do would be to learn how to deal with the change. Instead, their approach to every generation of technology is either to attempt to stymie it so badly that nobody wants it, or to stop it altogether through their influence with lawmakers in Washington DC.

Allworth goes on to note that while it was bad in the past, now it's reaching really dangerous levels with things like COICA and other attempts to alter basic technology and cut out the "heart of innovation," by driving innovative startups -- the companies creating the technology and services "Big Content" really needs -- to start and grow outside the US rather than at home.

The result of laws like this? Startups -- the engine of America's growth -- will just go elsewhere. China and India are creating environments extremely conducive to disruptive innovation. Even Europe is benefiting -- one of the most promising recent music services, Spotify, is hosted in Europe. It's still not available to American consumers.

[...]
If you're the next YouTube, would you want to locate here in the US and risk having the government simply switch off your site at the behest of Big Content? Or might it not be easier to find a more benign environment to create your business in?

The ultimate irony in all of this is that if we stop giving the content industries what they want -- sweeping, blanket protections -- we may actually be doing them a favor. They wanted the VCR banned. It turned out to be one of the most profitable technologies for the movie industry in its history. Ignoring their requests may turn out to be cruel to be kind -- instead of focusing on trying to fight the technology, they'll be forced to find ways of profitably embracing it.

Of course, this is the same point many of us have been making for years. I'm curious if now that it's in the Harvard Business Review, we'll hear about how this is all a part of the "free content astroturfing pirate conspiracy" that people have been accusing me of being a part of lately.

DIVX Stymie

DIVX (the video rental solution, not the video format, which is unrelated,) was killed because it wasn't what the customer wanted. It was, essentially, a solution to no problem. Customers had no problem renting regular DVDs and returning them to the store when finished, and most customers saw DIVX as a waste of money, resources, and a problem for logistics. The thought Circuit City had was that they could sneak their way in to the rental market and overtake the existing companies, but the problem was that DIVX required a phone line to phone home...and at the time, very few people wired telephone lines to their entertainment systems. Most of Hollywood welcomed DIVX, because it allowed them to charge money each time the movie was played, not just for the rental, used 3DES for the encryption which was stronger than DVD encryption, and some studios switched directly to using DIVX instead of DVD.

If you want a product stymied by big content, you have no further to look than the DAT (Digital Audio Tape.) Industry lobbying (Audio Home Recording Act of 1992) and vendor ham-fisting (by using "copyright bits") killed DAT before it could replace tape and reel-to-reel as a viable alternative since it was lossless, and less prone to media degradation. Of course, it's downfall did usher in CD and CD-writing technology.

Mash-up for Mega Profits

Making great content is hard and those who own it should be compensated.

Those who aggregate it and find novel ways to bring it to the consumer have the opportunity to gain as well.

There are many innovations that can help direct consumers to great content. Old media companies just need to partner with innovators and or nurture innovation within their ranks.

The consumer will decide what she likes.

It is the job of the content publisher to find distribution methods that meet the needs of the content audience. Innovators will fill the gap if the Publisher fails to.

Old Media (Publishers) need to think of new distribution mechanisms as content. If I can better enjoy a Publisher's content with feature X then it adds value. Publishers need to be on bleeding edge or open their minds to those who are and mash-up resources so that everyone wins.

Re: One could argue

I'm sure the gramophone faced the same issues, what with all those numbskulls listening to prerecorded music in degenerate solitude instead of a culturally invigorating experience like going to the orchestra.

Re:DMCA takedown pants

Re: Re: accusations

Do you think someone is going to buy an MP3 player that holds 5000 songs if they're going to have to pay $5000 to fill it up? Do you think they'll upgrade to a 10000 song version if that means spending another $10000 on music? That may be why the consumer electronics association supports the EFF.

Do you think Google wants to share their revenue with the content producers when they attach ads to their work? That may be why Google supports the EFF and Masnick.

Do you think that RapidShare, Megauploads and the rest want to go to jail? This may be why they support free content.

If the money goes to the content producers, it can't be spent on other things. This is a battle over the disposable income.

Free content astroturfing

I am his Highness' dog at Kew;
Pray tell me, sir, whose dog are you?
--"On the Collar of a Dog" by Alexander Pope.

Mike-- We all have to sing for our supper. Why do you think that Google News brought you in to discuss the future of the news business? Do you think they would bring in someone who might believe that maybe Google might help pay for the creation of the content that drives so much traffic to their site? They want their own dog on the pedestal.

Why do you think the Consumer Electronics Association donates to the EFF?

Allworth is not listed in the Faculty directory of Harvard Business School. Nor is there any mention on the web site of this so-called " Forum for Growth and Innovation at Harvard Business School". That doesn't mean that it's not real but it does mean that it's probably some soft money gig supported by an astroturfing company.

I won't argue with the idea that many people love the idea of getting something for free, but pay attention to the companies who want to encourage it. While it may seem to you that they "get it", as you like to say, they always seem to make more money when the people spend less on content.

Re: Free content astroturfing

Re: Re: Re: accusations

When is it not about disposable income?

The entindustry could be using or learning from those services to their advantage but fight or sue or demand the impossible from them instead.

Reliance on monopoly rents has made them stupid and lazy and without the ability to respond in any sensible way to their market, thus they deserve to lose the battle over other people's disposable income.

Re: Re:DMCA takedown pants

Can anybody name another example where the entire premise for a business model is a law sold to the people as good for the public/domain?
Only not in our lifetime. Or our children and parents lifetime.